A Charlottesville/Albemarle Area RE Blog tracking the market's Boom Bubble Bust Bounce, from 2008 to 2013. The second half of 2010 saw a steep downward spiral in sales; 2011 saw sales volume at 13 yr lo with prices dropping each Quarter. 2012 began with even lower prices which resulted in an uptick in Y/Y sales, and mid-2012 saw "Carpe Diem" trumping "Caveat Emptor." 2013: Booming. Are we a "Protected Market" once again? Time will tell.
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Monday, June 29, 2009

"Housing Hallucination" - Unsold? Turn It Into A Rental

Business Insider is tracking a phenomenon which they term "The New Housing Hallucination."

The 'hallucination' is this idea: "We'll rent for a year and then sell when the market comes back."

This phenom has been under way in Cville/Albemarle for a couple years now, growing into a strong trend in 2008. Now, in 2009, there are properties that have been for sale for more than a year which are being pulled off the market again and re-rented.The trend will grow stronger in the next couple of weeks, as sellers try to catch the August 1/ September 1 market of renters returning to UVA.

At the mid-to-high end in City of Charlottesville / Albemarle County (not the entire MSA) there are currently 430+ properties for sale $550K - $3M. Between $550K and $1M there are 323+ available. There are plenty of properties for sale above $3M as well.

[Hanson] thinks the next segment of the market to crash will be the mid- to high-end, where many smug homeowners are now telling themselves they'll just rent their houses for a year while they wait for the market to "come back." Needless to say, Mark thinks these folks are dreaming.Sales transactions have increased over the past couple of months because sellers are finally capitulating.Most of the properties being sold are from:a) those with lots of equity who know they better sell now or they will lose their opportunityb) those that know they will be able to steal the new house that they buy so it’s a washc) short sales being approved more oftend) foreclosure resales

In this area, the renting phenomenon occurs because sellers:

1. Can't lower prices - overleveraged, Or2. Won't lower prices - because they believe the property is "worth" the amount they want, Or3. Don't understand that housing, globally, has been in a bubble and that pricing is in a process of "correction," Or4. Have sufficient capital to "wait out the market," Or

Some combination of the above.Supply far exceeds demand.And will for years.

8 comments:

downtownenvy
said...

Hallucination is a great word for this. We have been renting for 5 years now, and we have no intention of buying until sellers wise up and adjust prices to workable levels.

Our landlord was extremely happy that we renewed our lease because apparently there is quite a glut of rental housing available here.He has never had trouble renting out all of his properties until this year, and now he has three that he is trying to unload and rent before the semester begins. It's starting to get uglier around here.

Tells sellers, many of whom are facing foreclosure or short sales, what their houses are really worth. From SFGate article:

"Real estate expert Mike Aubrey, who describes himself as "soft as an 8-pound sledgehammer," valiantly tried to demonstrate [to a couple whose property wasn't selling] that the $239,000 they were asking for their row house wasn't viable.

He took them to two comps, or nearby comparable listings - one a home that had recently sold for $217,000, and another a home on the market for $228,000. Although both the comps appeared larger and in better shape, the couple staunchly insisted that their own place was much more desirable.

"Why aren't they getting it?" Aubrey mused to the camera. "They're upset; they chose not to listen to me."

The show ended with Soto revisiting the couple two months later. They had finally dropped the price by $20,000, but the market had gotten even worse, so they ended up deciding to rent out their house for a slight monthly loss and try to sell it in the future.

The show shouldn't have any problem finding homeowners who are living in a state of denial. A series of surveys conducted for home-valuation service Zillow.com found that many Americans believe their property is worth more or the same, despite ample evidence to the contrary. Since last summer the quarterly survey has found more people accepting the reality that prices have swooned, but there are still plenty who think that somehow they are immune to macroeconomic forces."

On the flip side, the market downturn has created a large number of smug buyers, who feel that houses should be given to them for free. Even if a house has been priced in accordance with current conditions, buyers are making offers 20 to 30 per cent lower and making ridiculous demands, like asking for the house to be fully furnished.

I am not sure which group is out of touch the most - the sellers who still want 2007 prices, or the buyers who want 1990 prices.

Va. Housing Development Authority market data for the local Realtors Assn. indicates rising foreclosures, declining prices, then "correction" at least 12 months away.Comparisons: See Current Median Home Prices in Cville, Alb, other parts of VA, and 20 other markets.

Home prices likely lower in 2011, in 85% of the United States' 381 metropolitan areas - PMI Group. Includes graphs.VP Biden - We "Misread the Economy" - VideoThe number of foreclosures keeps rising because mortgageholders can't afford the modifications. Read the data.

Halsey Minor, King of The Tyvek Tower, is being sued not just by contractors, but by the funding bank. TheLandmark Mess continues. City claims it will not bail out the blight on the landscape and a real contrast to the $7.5 million in bricks at the base of the steel girders.